Interest in, and momentum toward, greater diversity in the boardrooms of U.S. publicly traded companies is increasing. We believe this is due to a combination of international developments, workplace trends and investor sentiment.

Although all aspects of diversity are meaningful topics, this post is solely focused on gender diversity. Currently, females represent approximately 15% of outside board member seats in the S&P 1500 and about 18% of the S&P 500 seats. This equates to a median of 1-2 female board members in a group of 9-11 board members.

While the overall statistics for U.S. companies are regularly reported, relatively little has been written about those U.S. public company boards that have moved farther down the path of gender diversity. For the purpose of our review, we define “gender diverse” at 30% female directors or more, using a standard typical in countries who have enacted legislation. Assuming more companies will want to reach a 30%+ level of gender diversity over the next decade, we wanted to study companies that have already achieved this level. We wanted to identify any specific similar characteristics that can be found at these companies and to learn more through selected interviews about the paths to a gender diverse board.

Janet T. Geldzahler is of counsel and Marc Trevino is a partner at Sullivan & Cromwell LLP. This post is based on the Summary of a Sullivan & Cromwell publication; the complete publication is available here.

Our 2015 Proxy Season Review summarizes significant developments relating to shareholder proposals to date during the 2015 proxy season. Although shareholder activists pursuing strategic or management changes continue to dominate the headlines, they do not choose to wage those campaigns through shareholder proposals made under Rule 14a-8, which are addressed by the complete publication, choosing instead private or public pressure, and often a threatened or actual proxy contest. Nonetheless, the widespread governance changes brought about through successful 14a-8 proposals have played no small part in the continued growth and success of shareholder activism.

During the 2015 proxy season, proxy access has been the most significant development. Far more proposals have been made and support has been substantially stronger. There have been 82 proxy access proposals to date in 2015, as opposed to 17 in all of 2014. In 2015, shareholders have approved 48 proposals to date (as opposed to five for all of 2014), and the average votes cast in favor have risen to 55% from 33% in 2014. Perhaps most significantly, modestly more restrictive management-enacted proxy access provisions apparently did not deter shareholders from proposing, and, in many cases, winning on the now standard shareholder proposal format of 3%/3-year/25% of board.

Gabriel D. Rosenberg is an associate in the Financial Institutions Group at Davis Polk & Wardwell LLP. This post is based on a Davis Polk publication.

July 21, 2015 marked the 5th anniversary of President Obama signing the Dodd-Frank Act into law. Even though the Act is more than 800 pages in length, it is the Act’s 390 rulemaking requirements and the 307 proposed and final rules issued by Federal agencies to date that make up the vast bulk of new law and regulation affecting the U.S. financial system. The 22,296 pages of rulemakings and 631 regulatory releases touch on nearly every aspect of the U.S. economy, from requiring revisions to mortgage disclosures to providing transparency in the derivatives markets.

In October 2000, the SEC enacted Rule 10b5-1 which enables managers to reduce their exposure to allegations of trading on material non-public information by announcing pre-planned stock sales up to two years in advance. In our paper, Timing Stock Trades for Personal Gain: Private Information and Sales of Shares by CEOs, which was recently made publicly available on SSRN, we examine the impact of Rule 10b5-1 on the gains that CEOs earn when they sell large blocks of stock.

Introduction

Overview

Corporate risk taking and the monitoring of risks have continued to remain front and center in the minds of boards of directors, legislators and the media, fueled by the powerful mix of continuing worldwide financial instability; ever-increasing regulation; anger and resentment at the alleged power of business and financial executives and boards, including particularly as to compensation during times of economic uncertainty, retrenchment, contraction, and changing dynamics between U.S., European, Asian and emerging market economies; and consistent media attention to corporations and economies in crisis. The reputational damage to companies and their boards that fail to properly manage risk is a major threat, and Institutional Shareholder Services now includes specific reference to risk oversight as part of its criteria for choosing when to recommend withhold votes in uncontested director elections. This focus on the board’s role in risk management has also led to increased public and governmental scrutiny of compensation arrangements and the board’s relationship to excessive risk taking and has brought added emphasis to the relationship between executive compensation and effective risk management. This post highlights a number of issues that have remained critical over the years and provides an update to reflect emerging and recent developments.

David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions and complex securities transactions. This post is based on a Wachtell Lipton publication by Mr. Katz, William Savitt, and Ryan A. McLeod. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Abbott Laboratories spun off AbbVie, its research-based pharmaceutical subsidiary, in January 2013. Before the spin, Abbott was a defendant in a False Claims Act action alleging unlawful off-label marketing of an AbbVie product. As part of the spin-off, AbbVie broadly released all claims it might have against Abbott or any Abbott affiliate relating to assets transferred to AbbVie, including liability for the False Claims Act claim.

In Miramar Police Officers’ Retirement Plan v. Murdoch[1] the Delaware Court of Chancery dismissed plaintiff’s claims, refusing to hold that an “unambiguous” boilerplate successors and assigns clause operated to bind a spun-off company to the terms of a contract entered into by its former parent company. The contract at issue generally restricted the former parent company from adopting a poison pill with a term of longer than one year without obtaining shareholder approval. The decision will serve as a reminder to practitioners to carefully consider the impact that significant corporate transactions could have on their clients’ contractual rights and obligations.

Ariel J. Deckelbaum is a partner and deputy chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss client memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In Acevedo v. AeroflexHoldingCorporation, in connection with a stockholder suit that challenged the sale of a company with a controlling stockholder to a third party, the Delaware Court of Chancery rejected a settlement which provided a global release of claims in exchange for a reduced termination fee and a shortening of the matching-rights period by one day, holding that these deal protections were not impediments to competing bidders and therefore were insufficient to support a global release.

In 2014, Aeroflex agreed to sell itself to a third-party and a class-action challenging the transaction was subsequently commenced. After engaging in discovery and consulting with third-party experts, the plaintiff concluded that the consideration offered to the Aeroflex stockholders fell within a range of reasonable value for Aeroflex’s shares, but that the proxy omitted certain material facts. The parties agreed to a settlement where the plaintiff granted the defendants a global release of all possible claims in exchange for modifying the deal protections by (i) reducing the termination fee by over 40% from $32 million to $18 million, and (ii) shortening the matching rights period from four business days to three business days. Additionally, the defendants agreed to make certain supplemental disclosures in the proxy.

Gaurav Jetley is a Managing Principal and Xinyu Ji is a Vice President at Analysis Group, Inc. This post is based on a recent article authored by Mr. Jetley and Mr. Ji. The complete publication, including footnotes, is available here. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Market observers have devoted a fair amount of attention to possible reasons underlying the recent increase in appraisal rights actions filed in the Delaware Chancery Court. A number of commentators have connected such an increase to recent rulings reaffirming appraisal rights of shares bought by appraisal arbitrageurs after the record date of the relevant transactions. Other reasons posited for the current increase in appraisal activity include the relatively high interest rate on the appraisal award and a belief that the Delaware Chancery Court may feel more comfortable finding fair values in excess of, rather than below, the transaction price.

In our paper Appraisal Arbitrage—Is There a Delaware Advantage?, we examine the extent to which economic incentives may have improved for appraisal arbitrageurs in recent years, which may help explain the increase in appraisal activity. We investigate three specific issues.

Dan Ryan is Leader of the Financial Services Advisory Practice at PricewaterhouseCoopers LLP. This post is based on a PwC publication by Bruce Oliver, Roozbeh Alavi, Garit Gemeinhardt, Amandeep Lamba, and Joe Walker.

Cyber attacks on financial institutions continue to increase, both in number and impact. While the industry’s defenses against cyber criminals have been improving, recent high-profile breaches indicate that many cyber risk areas remain under addressed.

Regulators are particularly concerned that the industry’s third-party service providers are a weak link that cyber attackers can exploit. [1] Financial institutions have become increasingly reliant on the information technology (IT) services these providers offer, either directly through the outsourcing of IT or indirectly through outsourced business processes that heavily rely on IT (e.g., loan servicing, collections, and payments). [2] Regardless, banks remain ultimately responsible—they own their service providers’ cyber risks.